4Q2007 Preliminary Results: Good Results, Overall In Line 29 january 2008 uae | telecom

ST Rec. : Buy Current Price*: AED 24.0 LT Rec. : Buy LT Fair Value : AED 31.3

• 4Q2007 Results Overall in Line, but Earnings Miss Slightly: Etisalat released preliminary FY2007 results that came overall in line with our estimates for the year. Net revenue for 4Q2007 (excluding in-payments and including both out-payments and discounts) grew 33.1% Y-o-Y and 11.8% Q-o-Q to AED5,954 million, in line with our estimate of AED5,907 million. Based on our estimates, 4Q2007 revenue should include revenues of the two start-up operations Etisalat Egypt (launched in mid-May) and Etisalat Afghanistan (launched at end-August). We are still hoping for the company to break down revenue by country to give us a clearer view on the operational performance of each. Based on our estimates, revenue generated from the UAE should contribute around 98% of the quarter’s total revenue. Etisalat’s 4Q2007 net profit grew 19.7% Y-o-Y but declined 2.1% Q-o-Q to AED1,764 million, 4.8% lower than our estimate of AED1,853 million. Given the absence of detailed financials, we are not yet able to provide insight into the earnings figure but believe the Q-o-Q decline to be attributable to underperformance at the start-ups operations, given that UAE subscriber growth was in line with our estimates. • UAE Mobile Subscriber Growth as Strong as Expected: Etisalat’s mobile subscribers in the UAE rose 15.9% Y-o-Y and 3.4% Q-o-Q to 6.4 million at end-December 2007, in line with our estimate of 6.3 million. du announced in mid-November it had reached the one million mobile subscriber mark, leading us to estimate that it had 1.1 million subscribers by end–December, of which 808,000 were active. This implies an estimated market share for Etisalat of 89% at end-2007. Etisalat fixed-line subscribers, which rose 3.0% Y-o-Y and 0.3% Q-o-Q to 1.32 million, also were in line with our estimates. We estimate that Etisalat’s share of the fixed-line market was 96% at end-December. • Pakistan Subscribers Meet our Estimates: Based on data from the Pakistani Telecom Authority (PTA), had 16.2 million subscribers at the end of 4Q2007, in line with the 16.3 million we forecast. Ufone is the mobile arm of Pakistan Telecommunication Company Limited (PTCL), which is 26% owned by Etisalat. The subscriber number implies a market share for Ufone at end-December of 21.0% versus our forecast of 21.4%. PTCL is consolidated under the equity method and is therefore reflected in one line in Etisalat financials as income from associates. • New Acquisitions in Brief: i) In December, Etisalat announced it will buy Rajawali Group’s 15.9% stake in Indonesian-based mobile operator PT Excelcomindo Pratama, the third mobile operator by subscribers in a seven- player market, for USD438 million. The remainder is owned 67% by Telekom Malaysia and 17% by Khazanah Nasional Berhad, the investment arm of the Malaysian Government. Excelcomindo, with around 13 million mobile subscribers, has a 14% market share. This acquisition allows Etisalat to enter one of the world’s most populated countries, with around 230 million people, and a market that has the potential to grow: Indonesia’s mobile penetration rate is now only in the mid-40s. ii) In January, Etisalat increased its stake in its Sudanese fixed- line operation Canar Telecom by 45% to 82%. Etisalat has not disclosed the value of the transaction. • Our Opinion: The preliminary results were overall in line with our estimates, but we still need to verify the numbers once the detailed financials are released. We maintain our bullish view on the company, which remains one of our top telecom picks in the region, as it has a well balanced portfolio of operations that offer both value and growth. We reiterate our ST/LT Buy recommendation on the stock with a LT Fair Value estimate of AED31.3 per share, implying upside potential of 31%. Etisalat currently trades on a 2008e EV/EBITDA of 6.7x and a P/E of 14.1x. flash note

Price (AED) ADI (Rebased) 2007e** 2008e 2009e 26 EPS* 1.46 1.70 1.83 24 PER(x) 16.4 14.1 13.1 DPS 0.70 0.83 0.92 22 Div. Yield 2.9% 3.5% 3.8% CFPS 1.82 1.78 2.09 20 PCF(x) 13.2 13.5 11.5 BVPS 4.43 4.92 5.42 18 PBV(x) 0.2 0.2 0.2 * Attributable **EPS is Actual 16

14 Stock Data 12 Last Ex-Div Date AED0.25 on 18 July 07 Mkt. Val. (Local mn) AED119,540 Shares (mn) 4,991 Av. Mthly Liqd. (mn) AED655 mn 52-Week High / Low AED24.9 / 14.1 28-Oct-07 28-Mar-07 28-Nov-07 28-Jan-07 28-Feb-07 28-Apr-07 28-Jun-07 28-Jul-07 28-Aug-07 28-Sep-07 28-Dec-07 28-Jan-08 Marise Ananian 28-May-07 Bloomberg / Reuters ETISALAT UH/ETEL.AD +20 2 33 32 1152 Est. Free Float 40.0% [email protected]

kindly refer to the *prices as of 28 January 2008 important disclosures and 1 disclaimers on back page etisalat 29 january 2008 flash note

Table 1: Etisalat Actual and Forecast KPIs and Income Statement KPIs (000's) 4Q06 3Q07 4Q07a 4Q07e Y-o-Y Q-o-Q Diff. FY06a FY07a FY07e Y-o-Y Diff. Mobile Subs (UAE) 5,520 6,190 6,400 6,339 15.9% 3.4% 1.0% 5,520 6,400 6,339 15.9% 1.0% Mobile Additions 260 200 210 149 -19.2% 5.0% 41.3% 986 880 819 -10.8% 7.5% FL Subs (UAE) 1,285 1,320 1,324 1,331 3.0% 0.3% -0.6% 1,285 1,324 1,331 3.0% -0.6% FL Additions 5 10 4 11 -20.0% -60.0% -65.1% 48 3946 -18.8%-16.1% Inc. Statement(AED mn) Net Revenue 4,475 5,327 5,954 5,907 33.1% 11.8% 0.8% 16,290 21,340 21,293 31.0% 0.2% Gross Revenue* 5,177 6,123 6,712 18,714 24,283 Total Costs (2,028) (2,239) (2,947) (6,180) (8,826) EBITDA 3,149 3,884 3,765 12,534 15,457 EBITDA Margin 60.8% 63.4% 56.1% 67.0% 63.7% Depreciation & Amortization (435) (587) (250) (1,391) (1,662) EBIT 2,715 3,297 2,715 11,143 13,370 Margin 52.4% 53.8% 40.4% 59.5% 55.1% Interest Expense (186) (295) (278) (262) (906) Interest Income 146 175 173 476 698 Other Income (Expenses) 46 - 127 46 158 Associates 158 163 295 267 656 Earnings before Minority Interest 2,879 3,340 3,408 11,670 13,976 Minority Interest 69 263 298 50 797 Earnings before Royalty Fees 2,947 3,603 3,706 11,719 14,773 Royalty Fees (1,474) (1,801) (1,853) (5,860) (7,386) Net Profit 1,474 1,801 1,764 1,853 19.7% -2.1% -4.8% 5,860 7,297 7,386 24.5% -1.2%

* Etisalat did not report Gross Revenue for 3Q07. Gross Revenue for this quarter is based on EFG-Hermes estimates. Gross Revenue includes in-payments and excludes both out-payments and discounts Source: Etisalat, EFG-Hermes estimates

kindly refer to the important disclosures and 2 disclaimers on back page egypt sales team dubai sales team ksa sales team research management call center +202 16100 call center +971 4 306 9333 call center +800 123 4566 Cairo General + 20 2 33 38 8864 [email protected] [email protected] UAE General + 971 4 363 4000 Head of Western Institutional Sales [email protected] Mohamed Ebeid Head of UAE Brokerage Head of KSA Brokerage +20 2 33 32 1054 Seif Fikry Hesham Khalil Head of Research [email protected] +971 4 363 4085 +9661 211 3040 Philip Khoury [email protected] [email protected] +971 4 363 4002 Local Institutional Sales [email protected] Amr El Khamissy UAE Institutional Sales Head of KSA Sales +20 2 33 32 1045 Amro Diab Mohsen Mansour Head of Egypt Research [email protected] +971 4 363 4086 +9661 211 3008 Wael Ziada [email protected] [email protected] +20 2 33 32 1154 Retail Sales [email protected] Cairo Call Centre UAE Retail Sales 16900 Reham Tawfik Head of Publ. and Distribution [email protected] +971 4 363 4418 Rasha Samir [email protected] +20 2 33 32 1142 Gulf Sales [email protected] Ahmed Salem +20 2 33 32 1078 [email protected] disclosures I, Marise Ananian, hereby certify that the views expressed in this document accurately reflect my personal views about the securities and companies that are the subject of this report. I also certify that neither me nor my spouse or dependants (if relevant) hold a beneficial interest in the securities that are traded in the UAE stock exchanges.

EFG-Hermes Holding hereby certifies that neither it nor any of its subsidiaries owns any of the securities that are the subject of this report. Funds managed by EFG-Hermes Holding and its subsidiaries for third parties may own the securities that are the subject of this report. EFG-Hermes may own shares in one or more of the aforementioned funds or in funds managed by third parties. The authors of this report may own shares in funds open to the public that invest in the securities mentioned in this report as part of a diversified portfolio over which they have no discretion.

The Investment Banking division of EFG-Hermes may be in the process of soliciting or executing fee earning mandates for companies that are either the subject of this report or are mentioned in this report. disclaimer Our investment recommendations take into account both risk and expected return. We base our long-term fair value estimate on a fundamental analysis of the company's future prospects, after having taken perceived risk into consideration. We have conducted extensive research to arrive at our investment recommendations and fair value estimates for the company or companies mentioned in this report. Although the information in this report has been obtained from sources that EFG-Hermes believes to be reliable, we do not guarantee its accuracy, and such information may be condensed or incomplete. Readers should understand that financial projections, fair value estimates and statements regarding future prospects may not be realized. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice. This research report is prepared for general circulation and is intended for general information purposes only. It is not intended as an offer or solicitation with respect to the purchase or sale of any security. It is not tailored to the specific investment objectives, financial situation or needs of any specific person that may receive this report. We strongly advise potential investors to seek financial guidance when determining whether an investment is appropriate to their needs. No part of this document may be reproduced without the written permission of EFG-Hermes. efg-hermes (dubai), level 6, the gate, west wing, difc dubai - uae tel +971 4 363 4000 | fax +971 4 362 1170 bloomberg efgh reuters pages .efgs .hrms .efgi .hfismcap .hfidom efg-hermes.com